Why Obamacare shouldn’t force poor seniors into Medicaid

The nearly 9 million Americans who are dually eligible for both Medicare and Medicaid have long been poorly served by the health care system.

These elderly poor and disabled Americans suffer disproportionately from serious medical conditions. In the case of full duals, half initially qualified for Medicare because of disability rather than age, and nearly one-fifth have three or more chronic conditions. Many are obligated to poverty precisely because their serious health problems make it hard for them to sustain jobs or build savings.

Now as a result of Obamacare, many will be forcibly moved into Medicaid HMOs once another long-delayed element of the bill starts to get implemented this fall.

For all of these duals, medical care is especially costly. That has made the “duals” a focus of policy attention. According to a new report from the Congressional Budget Office the average “dual” beneficiary costs the government $33,300 per year. This compares with $8,300 for the average senior who only receives Medicare.

Finding better ways to serve the needs of these “dually eligible” Americans has been a bi-partisan goal that’s eluded successive administrations. Whenever the issue was broached, one of the questions was whether these Americans would end up in Medicare or Medicaid — and which program would better serve their needs. The Obama Administration is betting heavily on states to take control of these patients. The states, in turn, are looking to their Medicaid systems.

It’s now clear now that many of the “duals” will end up in Medicaid plans as a result of a new program tucked into Obamacare.

Republicans are reluctant to shoot at this arrangement because it’s viewed as a nod toward federalism since the program relies on the states to administer benefits.

For its part, the Obama administration has embraced principles that progressives have long opposed – a form of premium support that turns control of Medicare beneficiaries over to managed care health plans, and relies on state over federal specification of benefits. Only in this case, the elderly poor are being forcibly moved into these plans. As one health care observer wryly noted, the scheme is a form of premium support, only without the choice.

This is going to obligate these Americans to a decaying state Medicaid system that is not equipped or accustomed to managing their unique medical problems.

It’s going to encourage states to cross-subsidize their existing Medicaid programs by skimming money off Medicare that could have gone to patient care.

It’s going to eliminate the ability of the “duals” to choose their own doctors and obligate them to low-cost, and in many cases lower quality Medicaid networks.

It’s going to put elderly seniors into state Medicaid managed care plans that have no experience, or particular expertise in managing medical care for the aged.

It’s going to freeze “duals” out of options that they were entitled to by virtue of their Medicare eligibility. This includes the Medicare special needs plans (SNPs) created by the Medicare Modernization Act. Properly resourced while being held accountable for the quality of care they deliver, the SNPs could better serve the needs of the “duals”. Already about 15% of the duals are enrolled in SNP plans.

Under the plan being established by the Obama Administration, many of the “duals” could end up permanently locked out of these Medicare options.

Because Medicaid generally lacks experience taking care of elderly Medicare beneficiaries (along with the Medicaid HMOs that the “duals” are being enrolled into) some progressive healthcare policy experts have advocated that Medicare continue to take the lead in providing services for these beneficiaries.

The Affordable Care Act created a Federal Coordinate Healthcare Office (now the Medicaid-Medicaid Coordination Office) to “improve the integration of Medicare and Medicaid benefits” for the elderly poor and disabled beneficiaries who are dually eligible for both programs.

The principal approach has been series of contracts, initially awarded to 26 states, to “structure, implement, and evaluate an intervention aimed at improve the quality, coordination and cost-effectiveness of care” for the duals. (CMS Request for Proposals, State Demonstrations to Integrate Care for Dual Eligibles). But like a lot of other parts of Obamacare, things haven’t gone smoothly. More than half of the states that applied to participate have either dropped out or delayed implementation of their programs. The entire program is woefully behind schedule.

The program is being structured as a demonstration under the ACA. But many of the participating states have already said that they plan to move most, if not all of their dually eligible Medicare and Medicaid beneficiaries into the new plans. These state plans typically rely on their existing Medicaid networks to deliver the care.

The program is designed around three-way contracts between a participating state, CMS, and the health plans that the states contract with. The health plans are capitated – like traditional HMOs. They are given a lump sum for taking care of a pre-determined population of dually eligible beneficiaries.

The contracts are based on a blended rate that’s supposed to pay for all primary and acute care, behavioral health, and long-term services and supports that beneficiaries might require. The aim is to “auto-enroll” duals into these plans. As of August 2013, CMS had only approved proposals from 6 states, well behind its original schedule. Those states are California, Illinois, Ohio, Massachusetts, Virginia, and Washington to implement the project.

Massachusetts was supposed to be the first state to go live with their dual program last April, but has delayed the start date. Several plans that successfully bid on the Massachusetts program recently withdrew their participation, citing the low rates that the state was going to pay them to care for the dual lives. As a result, several Massachusetts counties that were going to participate in the program now can’t because not enough plans will be servicing their areas.

In California, about 460,000 low-income residents were scheduled to move into the states Medicaid networks in early 2013, then October. Now it’s slated to launch by the beginning of 2014, at the earliest.

The New York demonstration won’t begin until July 2014. When it does, the state estimates that about 170,000 dual eligibles will be enrolled in one of about 25 different plans – a list that includes most of the existing state Medicaid plans.

The “demonstrations” are supposed to last three years. While CMS has said that beneficiaries will have the chance to opt out of the program, the idea is that most beneficiaries will be moved into the new plans involuntarily. That’s seen as the only way to make sure that the bulk of the duals are migrated into the new scheme.

Some states will enroll almost all of their duals into the new plans. But there are serious questions whether the plans, and the state agencies, have the capacity and experience to care for a large population of elderly and disabled beneficiaries.

CMS has developed a set of “preferred requirement standards” to help make sure the selected health plans meet some minimum criteria. These include evaluation of the benefit package and the accompanying drug benefit, the adequacy of the provider network that patients will have access to.

But it’s unclear how much of a roll CMS will play in actually enforcing these standards. It seems this process will largely be left up to the states. This means that important protections available to other Medicare beneficiaries are, paradoxically, being waived when it comes to the most vulnerable among these beneficiaries.

There are also significant questions around what kinds of plans will be eligible for participation. Existing Medicare Special Needs Plans and Medicare Advantage plans are eligible to bid in the new program. But so far, reimbursement levels have been set so low that some SNP plans that said they would play have already pulled out.

There’s also evidence that some states are deliberately freezing SNP plans out of the bidding. One state is rumored to be offering no-bid contracts. California has opted to move all of its participating dual population into its existing Medi-Cal program using its county managed care plans. Vermont will have the state Medicaid agency become the managed care organization for duals.

Other states are opening bidding to a variety of plans. But low reimbursement levels mean that the program is being served by mostly low cost Medicaid plans like Molina [MOH:NYSE] or HealthNet [HNT:NYSE].

There’s also the ongoing risk that the entire scheme is used by states as a way to skim money off Medicare and cross-subsidize their existing Medicaid programs. States have a long history of gaming their Medicaid programs to secure more Federal aid. In allocating money to the states for the dual demo programs, CMS is calculating a baseline of anticipated spending for individual beneficiaries. Any additional savings will be split between the states and the feds based on how much each contributed to the up front costs of purchasing a particular health plan.

CMS isn’t revealing its methodology for calculating the baseline, or the anticipated savings. Nor will it be known which services got reduced in order to generate the savings. It’s also not clear how beneficiaries will benefit from the savings, if at all.

Given all the shortcomings of moving the duals into state Medicaid schemes, it begs the question why the Obama Administration has taken this route. The Administration often speaks of its efforts to address the needs of the elderly poor as a way to reduce spending. First and foremost, these policy questions should be tackled as a means to improve health, and lift some of these people out of poverty.